ADVANCED ACCOUNTING EXAMS TEST PAPER QUESTIONS
AND ANSWERS SURE A+
✔✔A _________ _______ is the cost of one currency in terms of another -
✔✔exchange rate
✔✔The _____ ______ is the price at which a foreign currency can be purchased or sold
today - ✔✔spot rate
✔✔The ____ _____ is the price available today at which foreign currency can be
purchased or sold in the future. - ✔✔forward rate
✔✔______ _______ indicate the number of domestic currency needed to purchase one
unit of foreign currency - ✔✔direct quotes
✔✔_______ ________indicate the number of foreign currency units that could be
purchased with one unit of domestic currency - ✔✔indirect quotes
✔✔Foreign currency options give the holder of an option ___ _____ ___ ___ ____
_______ to trade foreign currency in the future - ✔✔the right but not the obligation
✔✔_____ options allowfor the sale of foreign currency by the option holder. - ✔✔put
✔✔_____ options allow for the purchase of foreign currency by the option holder -
✔✔call
✔✔A ______ _____ is the exchange rate at which options will be executed if option
holders decide to exercise options - ✔✔strike price
✔✔The exporter is exposed to the risk that the foreign currency might _______ between
the sale and payment dates - ✔✔depreciate
✔✔The importer is exposed to the risk that the foreign currency might ________
between the purchase and payment dates, increasing the domestic currency padi -
✔✔appreciate
✔✔ With regard to the corporate strategy used to hedge foreign exchange risk -
✔✔companies follow a variety of different strategies
✔✔An increase in the fair value of a foreign currency forward contract used to hedge a
fair value exposure of a foreign currency denominated asset or liability is reported as -
✔✔An asset on the balance sheet. And
AND ANSWERS SURE A+
✔✔A _________ _______ is the cost of one currency in terms of another -
✔✔exchange rate
✔✔The _____ ______ is the price at which a foreign currency can be purchased or sold
today - ✔✔spot rate
✔✔The ____ _____ is the price available today at which foreign currency can be
purchased or sold in the future. - ✔✔forward rate
✔✔______ _______ indicate the number of domestic currency needed to purchase one
unit of foreign currency - ✔✔direct quotes
✔✔_______ ________indicate the number of foreign currency units that could be
purchased with one unit of domestic currency - ✔✔indirect quotes
✔✔Foreign currency options give the holder of an option ___ _____ ___ ___ ____
_______ to trade foreign currency in the future - ✔✔the right but not the obligation
✔✔_____ options allowfor the sale of foreign currency by the option holder. - ✔✔put
✔✔_____ options allow for the purchase of foreign currency by the option holder -
✔✔call
✔✔A ______ _____ is the exchange rate at which options will be executed if option
holders decide to exercise options - ✔✔strike price
✔✔The exporter is exposed to the risk that the foreign currency might _______ between
the sale and payment dates - ✔✔depreciate
✔✔The importer is exposed to the risk that the foreign currency might ________
between the purchase and payment dates, increasing the domestic currency padi -
✔✔appreciate
✔✔ With regard to the corporate strategy used to hedge foreign exchange risk -
✔✔companies follow a variety of different strategies
✔✔An increase in the fair value of a foreign currency forward contract used to hedge a
fair value exposure of a foreign currency denominated asset or liability is reported as -
✔✔An asset on the balance sheet. And
